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The annual inflation rate in the United States decelerated slightly to 6.4% in January, from 6.5% in December. Inflation figure came in higher than market forecasts of 6.2%. Still, it marked the lowest reading since October of 2021.
Compared to the previous month, the CPI rose 0.5%, the most in three months and following a 0.1% increase in December. Economists surveyed by Dow Jones expected an increase of 0.4%, as quoted on CNBC.
Against this backdrop, we suggest a few sector ETFs that can be worth investing at the time of rising inflation. Below we highlight those.
Real Estate
Weighted shelter makes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, per data from MacroMicro. Shelter costs rose 7.9% in January, up from 7.5% in December. Month over month, prices are up 0.7%. Rising home prices also boosted the demand for real estate.
Kelly Residential & Apartment Real Estate ETF should thus win. The underlying Strategic Residential & Apartment Real Estate Sector Index is a rules-based index that consists of U.S. and Canada-listed companies engaged in Apartment Buildings, Single-Family Rental Homes, Student Housing or Manufactured Homes. The fund yields 3.58% annually.
Energy
The energy sector tends to perform well in an inflationary environment. Revenues of energy stocks are dependent on energy prices, a key factor of inflation indices. The operating backdrop of the sector, too, is bullish. Oil prices have been in great shape since the beginning of 2022.
The energy index rose 8.7% in January after a gain of 7.3% in December. Fuel oil marked a considerable gain (up 27.7%) in the month. The upside in crude oil prices was triggered by factors like easing COVID-19 concerns, supply shortages, and geopolitical tensions in energy-rich Eastern Europe and the Middle East. Oil prices especially jumped recently as Russia announced 5% oil output cut in March.
Zacks Rank #2 SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) could be a good play here.
Consumer Staples
The food index increased 0.5% in January, and the food at home index gained 0.4% sequentially. Food at home index increased 11.3% year over year in January. The index for cereals and bakery products rose 15.6% year over year ending in January. The remaining major grocery store food groups recorded increases ranging from 7.2% (fruits and vegetables) to 14.0% (dairy and related products). Four of the six major grocery store food group indexes rose sequentially.
Zacks Rank #2Consumer Staples Select Sector SPDR ETF (XLP - Free Report) looks to track the Consumer Staples Select Sector Index. Beverages (27.61%), household products (21.9%), food & staples retailing (19.3%) and food products (19.1%) are four top industries in the fund.
Transportation
The transportation index jumped 0.9% sequentially in January after an uptick of 0.6% in December. The index gained 14.6% year over year.
SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #3. Trucking takes about 40.34% of the fund, followed by Airlines (26.17%), Air Freight & Logistics (18.65%).
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4 Sector ETFs to Win from January Inflation Data
The annual inflation rate in the United States decelerated slightly to 6.4% in January, from 6.5% in December. Inflation figure came in higher than market forecasts of 6.2%. Still, it marked the lowest reading since October of 2021.
Compared to the previous month, the CPI rose 0.5%, the most in three months and following a 0.1% increase in December. Economists surveyed by Dow Jones expected an increase of 0.4%, as quoted on CNBC.
Against this backdrop, we suggest a few sector ETFs that can be worth investing at the time of rising inflation. Below we highlight those.
Real Estate
Weighted shelter makes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, per data from MacroMicro. Shelter costs rose 7.9% in January, up from 7.5% in December. Month over month, prices are up 0.7%. Rising home prices also boosted the demand for real estate.
Kelly Residential & Apartment Real Estate ETF should thus win. The underlying Strategic Residential & Apartment Real Estate Sector Index is a rules-based index that consists of U.S. and Canada-listed companies engaged in Apartment Buildings, Single-Family Rental Homes, Student Housing or Manufactured Homes. The fund yields 3.58% annually.
Energy
The energy sector tends to perform well in an inflationary environment. Revenues of energy stocks are dependent on energy prices, a key factor of inflation indices. The operating backdrop of the sector, too, is bullish. Oil prices have been in great shape since the beginning of 2022.
The energy index rose 8.7% in January after a gain of 7.3% in December. Fuel oil marked a considerable gain (up 27.7%) in the month. The upside in crude oil prices was triggered by factors like easing COVID-19 concerns, supply shortages, and geopolitical tensions in energy-rich Eastern Europe and the Middle East. Oil prices especially jumped recently as Russia announced 5% oil output cut in March.
Zacks Rank #2 SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) could be a good play here.
Consumer Staples
The food index increased 0.5% in January, and the food at home index gained 0.4% sequentially. Food at home index increased 11.3% year over year in January. The index for cereals and bakery products rose 15.6% year over year ending in January. The remaining major grocery store food groups recorded increases ranging from 7.2% (fruits and vegetables) to 14.0% (dairy and related products). Four of the six major grocery store food group indexes rose sequentially.
Zacks Rank #2Consumer Staples Select Sector SPDR ETF (XLP - Free Report) looks to track the Consumer Staples Select Sector Index. Beverages (27.61%), household products (21.9%), food & staples retailing (19.3%) and food products (19.1%) are four top industries in the fund.
Transportation
The transportation index jumped 0.9% sequentially in January after an uptick of 0.6% in December. The index gained 14.6% year over year.
SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #3. Trucking takes about 40.34% of the fund, followed by Airlines (26.17%), Air Freight & Logistics (18.65%).